ICI Supports Improvements to Existing Settlement SystemWashington, DC, August 13, 2002 - The Institute supports an initiative to examine vulnerabilities in the government securities market, but believes that the creation of a central utility to clear, settle, and finance U.S. government securities is unnecessary. In a recent comment letter to the SEC and the Federal Reserve Board, the Institute supports making improvements to the existing settlement system, including: - establishing minimum standards for the business continuity capabilities of the clearing banks;
- requiring these banks to coordinate their continuity capabilities;
- imposing periodic regulatory examinations of the business continuity capabilities;
- imposing mandatory periodic testing of the capabilities with all market participants; and
- strengthening the communication channels and broadening the network of market participants that are communicated with during times of crisis.
The Institute opposed the creation of a central settlement utility on the grounds that it could adversely impact the operational risk in the system by creating a single point of failure; eliminate or substantially reduce the innovation and efficiency present in the current system; entail a costly, time-consuming, and untested process; and adversely impact liquidity.
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